Critical Review: Alexander & Baldwin (NYSE:ALEX) and Starwood Property Trust (NYSE:STWD)

Starwood Property Trust (NYSE:STWD) and Alexander & Baldwin (NYSE:ALEX) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, profitability, valuation, risk, institutional ownership, earnings and analyst recommendations.

Dividends

Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 9.8%. Alexander & Baldwin pays an annual dividend of $0.89 per share and has a dividend yield of 5.4%. Starwood Property Trust pays out 179.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alexander & Baldwin pays out 145.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alexander & Baldwin has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings for Starwood Property Trust and Alexander & Baldwin, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starwood Property Trust	0	3	4	0	2.57
Alexander & Baldwin	0	2	1	0	2.33

Starwood Property Trust currently has a consensus target price of $21.71, indicating a potential upside of 11.01%. Alexander & Baldwin has a consensus target price of $18.50, indicating a potential upside of 11.24%. Given Alexander & Baldwin’s higher probable upside, analysts plainly believe Alexander & Baldwin is more favorable than Starwood Property Trust.

Profitability

This table compares Starwood Property Trust and Alexander & Baldwin’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Starwood Property Trust	16.55%	9.38%	0.87%
Alexander & Baldwin	20.25%	4.76%	2.82%

Institutional and Insider Ownership

49.8% of Starwood Property Trust shares are held by institutional investors. Comparatively, 91.3% of Alexander & Baldwin shares are held by institutional investors. 5.8% of Starwood Property Trust shares are held by company insiders. Comparatively, 0.7% of Alexander & Baldwin shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

Starwood Property Trust has a beta of 1.65, indicating that its stock price is 65% more volatile than the S&P 500. Comparatively, Alexander & Baldwin has a beta of 1.21, indicating that its stock price is 21% more volatile than the S&P 500.

Valuation & Earnings

This table compares Starwood Property Trust and Alexander & Baldwin’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starwood Property Trust	$2.05 billion	2.99	$339.21 million	$1.07	18.28
Alexander & Baldwin	$208.90 million	5.78	$29.80 million	$0.61	27.26

Starwood Property Trust has higher revenue and earnings than Alexander & Baldwin. Starwood Property Trust is trading at a lower price-to-earnings ratio than Alexander & Baldwin, indicating that it is currently the more affordable of the two stocks.

Summary

Starwood Property Trust beats Alexander & Baldwin on 9 of the 17 factors compared between the two stocks.

About Starwood Property Trust

Starwood Property Trust, Inc. operates as a real estate investment trust (REIT) in the United States and internationally. The company operates through Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing segments. The Commercial and Residential Lending segment originates, acquires, finances, and manages commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), and residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, include distressed or non-performing loans. The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments. The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment. The Investing and Servicing segment manages and works out problem assets; acquires and manages unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions; originates conduit loans for the primary purpose of selling these loans into securitization transactions; and acquires commercial real estate assets that include properties acquired from CMBS trusts. The company qualifies as a REIT for federal income tax purposes and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2009 and is headquartered in Greenwich, Connecticut.

About Alexander & Baldwin

Alexander & Baldwin, Inc. (NYSE: ALEX) (A&B) is the only publicly-traded real estate investment trust to focus exclusively on Hawai'i commercial real estate and is the state's largest owner of grocery-anchored, neighborhood shopping centers. A&B owns, operates and manages approximately 3.9 million square feet of commercial space in Hawai'i, including 22 retail centers, 13 industrial assets and four office properties, as well as 142.0 acres of ground lease assets. A&B is expanding and strengthening its CRE portfolio and achieving its strategic focus on commercial real estate in Hawai'i. Over its 154-year history, A&B has evolved with the state's economy and played a leadership role in the development of the agricultural, transportation, tourism, construction, residential and commercial real estate industries.